No relief from New England energy costs in near future

By DAVE SOLOMONNew Hampshire Union LeaderJune 30. 2014 7:19PMGOFFSTOWN — When the lights flickered briefly in the crowded conference center at St. Anselm College’s New Hampshire Institute of Politics, all eyes turned to the man responsible for keeping the lights on in New England.

Gordon Van Welie, president of ISO-NE, which manages the regional grid and wholesale energy market in New England, had just finished a presentation full of dire warnings about the cost of electricity in the region for at least the next three years.

“ISO is increasingly reliant on resources with uncertain performance and availability,” he said. “We’ve lived with this problem for 10 years and it’s gotten worse. It’s gotten to the point now that it’s quite critical that we do something about it.”

As the lights dimmed briefly, the moderator for the day’s panel discussion on “New England’s Looming Energy Crisis,” looked toward van Welie, and joked, “Gordon, we turn to you.”

Neither van Weilie nor the five representatives of the New England states on hand for the event hosted by the New England Council had an immediate solution to offer to consumers in the six states who collectively shelled out $3 billion more in energy costs than they would have if natural gas flowed more readily from western Pennsylvania into New England.

The nature of the problem has been well-documented. In the past decade, New England power plant owners shifted from expensive coal and oil to cheaper natural gas, a trend that is being accelerated by the retirement of nuclear facilities such as Vermont Yankee and coal-fired Brayton Point in Massachusetts.

As more homes and businesses joined power plant operators on the natural gas bandwagon, the demand for gas increased exponentially, while the pipeline capacity for delivering that gas into New England remained stagnant.

On one day in January, van Welie said, ISO was expecting gas-fired plants to deliver 11,000 megawatts of power, but could only get 3,000 megawatts, leaving grid operators to scramble for other resources.

“The lights did not go out this past winter, but that doesn’t mean they can’t, during a cold snap or even on some hot weather on a day like today,” said Nicholas Ucci, chief of staff at the Rhode Island Office of Energy Resources.

Pipeline builders want 15- to 20-year commitments from power plant owners to purchase gas at a contracted price, while power plant owners prefer to buy on the spot market to benefit from the low prices nine months of the year.

“We just can’t allow New England to become an economy that only operates nine months out of the year,” said Patrick C. Woodcock, director of the Governor’s Energy Office in Maine. “There has to be a way to get gas from the cheapest gas fields in the world into New England.”

Enter the governors of the six New England states, who in January announced a plan to finance a new natural gas pipeline and a new transmission project for hydroelectric power from Quebec through a tariff on ratepayers.

While expressing concern about what they called unprecedented government intervention in energy markets, the representatives from New Hampshire, Maine, Massachusetts and Rhode Island energy or public utilities offices all spoke in support of the governors’ initiative.

ISO is introducing changes in the wholesale energy market designed to encourage power plant owners to buy the contracts that will lead to pipeline construction without ratepayer funding, but those efforts are at least three years away from taking full effect, and their impact is uncertain.

“We need market fixes,” said Robert Scott, a PUC commissioner in New Hampshire. “But they’re not here now, and it’s not as easy as it sounds. In the meantime, this initiative buys some time for that to happen.”